Why do we pay taxes? Everyone grumbles about having to pay taxes and worries about paying too much, but how many of us worry about paying enough? How many of us go about our daily business thinking about avoiding our tax? More to the point, how many of us can afford to pay someone to think of ways to avoid paying taxes?
Yet, that is exactly what Barclays and other organisations are doing when they avoid paying taxes. They are not simply deferring taxes or waiting until the tax burden is lower (the idea behind IRAs in the US or ISAs in the UK). They are actively working to avoid legally mandated taxes. These taxes fund the government’s programmes that deliver programmes for the common good. Yet, the organisation chose to avoid that responsibility. When it does, how can it say that it is behaving responsibly? How can it say that it is a good corporate citizen as Bob Diamond CEO of Barclay’s Capital Group claimed?
Here is how Barclays citizenship report stated their commitment.
Citizenship is not peripheral to our business, but rather lies at the heart of what we do – which is to employ Barclays unique resources, expertise and people to support our customers, clients and communities. (Barclays Annual Report 2010)
If being a good citizen means obeying the laws and taxes are the law, what does that say about Barclays? Do their tax avoidance lawyers wake up each morning and decide which laws they are going to obey? The philosophical questions this poses are why do we obey the law, and; what does it mean to be virtuous?
The questions are not idle. The questions go to the heart of what it means to be a good citizen. Our respect for democratic legitimacy is one of the reasons why we obey the law. We know it is there to protect us as well as others. The law is not made for one group at the expense of others; it is there for the common good. A respect for the law is a key part of a fundamental democratic belief in the common good. If we simply obey the law because it may punish us, how is that different from a tyranny?
If good citizens do not pay their taxes, how can they support the common good? How can we draw from the common good for essential (and discretionary) government services like libraries, leisure centres, hospitals, or roads? These questions get to the heart of what it means to avoid tax. What are we doing when we avoid tax but avoiding compliance with the law passed by a democratically elected body and enacted through a democratically accountable organisation?
The deeper questions, especially for an employee of these organisations, are the following. If the organisation is spending vast amounts of resources to avoid taxes, that is avoid obeying the law, what other laws are they avoiding? Are they doing the same with their responsibility to health and safety laws? Are they equally responsible to equalities legislation? Why do you accept they will honour their Health and Safety responsibility, when they avoid their tax responsibility? Why do you accept that they can avoid their tax responsibility but they will honour their equalities duties? Why do you as an employee accept their irresponsibility to the common good, when they seek to avoid their tax responsibility?
Here is Barclay’s press statement in which they claim they brought the tax avoidance issue to the HMRC’s attention
If companies, especially banks, are avoiding their taxes, how can they claim to be supporters of corporate social responsibility? How can they claim to be good citizens when they undermine the common good? Do good citizens undermine the common good? For a morally challenged analysis of the issue, see this article. What makes it troubling is it is unable to define a good citizen or the good regime to understand what it means to obey the law. It cannot express what it means to be virtuous as a corporate citizen. With advice such as this, one is in little doubt about why corporate directors may have difficulty addressing moral choices like paying taxes or being a virtuous corporate citizen.
What is interesting to note is that the UK government’s Border Agency has a financial requirements for entry into the UK. In addition to the applicant showing they are of good character, they must have a good financial background.
We will check that you pay income tax and National Insurance contributions. We may ask HM Revenue & Customs for confirmation of this. If you do not pay income tax through Pay As You Earn (PAYE) you should send a Self Assessment Statement of Account with your application.
If Barclays were applying for entry into the UK, would they be allowed entry?
Indeed, if we follow Aristotle’s analysis Barclays behaviour appears to suggest that it is superior to the current regime as it is not a good regime. Aristotle argued in the Politics that the virtue of the good citizen and the excellent man were the same only under an ideal regime. In this regard, Barclays would appear to be suggesting their excellence means that they cannot be good citizens. To be a good citizen means to pay taxes. Yet, their “excellence” (their profit motive) appears to exempt them from that responsibility. Barclays and others are behaving as they do, avoiding paying tax (acting in a tax efficient manner), to show that they are beholden to a different standard. They are suggesting that they exist beyond the regime. Moreover, their behaviour suggests that the regime is corrosive of their virtue (as a legal person) and thus they are not bound by its requirements. If this is what they are suggesting, then we have a deeper problem within the UK. What this may suggest is that we have two regimes, one for those who have to obey the laws and those who can choose which laws they obey.
As we see daily with the Leveson inquiry revelations, such a view, that a small minority are above the law, is corrosive and dangerous to democracy. If we no longer accept that view from the media operators, why should we accept that from banks? Even if they pay more in taxes, why should we allow banks and financial organisations to act differently? If they are above the law, how can they claim to be good citizens? When they act above the law, it shows disrespect to the laws and the citizens who obey the laws. In other words, it shows that they are not fit to be part of the society or able to share in the common good.
We face a difficult choice. Either we can accept that some in our society are above the law, and allow our democracy to be diminished, or we can demand that citizens obey the laws, pay their taxes, help their fellow citizens to nourish and expand the common good.
Will you choose the corporate good or the common good?
- Barclays confirms it is bank at centre of tax avoidance row – The Guardian (guardian.co.uk)
- Zero tax for RBS on massive profits from bond trades (independent.co.uk)